It was an emotional board meeting of the Dallas Police and Fire Pension System on Tuesday as trustees debated making substantial cuts to the fund’s popular deferred retirement program before about 50 active and retired cops and firefighters.

The program, called DROP, now pays a guaranteed minimum of 8 percent interest on member and retiree accounts, which total about $1.35 billion, equal to nearly 40 percent of the fund’s net assets.

Maintaining that lucrative benefit in the current economic environment has resulted in a loss to the system of about $325 million, trustees and guests were told, and threatens the long-term viability of the pension fund.

“The risk of paying that higher interest rate has to come off the fund,” chairman George Tomasovic said.

During the public comment period, two speakers threatened lawsuits if any changes were made. Another offered to donate his million-dollar DROP account to the fund. Several of the dozen speakers criticized the investment decisions of trustees and fund managers, past and present.

Also Tuesday, the fund revealed that the investment return in 2013 for its $3.4 billion in net assets was 4.4 percent, well below the initial estimate of 11 percent early this year and well below overall market averages.

Since the initial estimate, the fund has taken substantial write-downs in the value of some of its real estate and private equity holdings and ousted its longtime administrator, Richard Tettamant, amid concerns about investment strategies and returns.

Compared with other public funds, the police and fire system is more heavily invested in alternative investments, such as real estate, and less heavily invested in stocks.

Tettamant left the system in June. He received $290,000 in severance, stipulated by his contract, system officials said Tuesday. Of that, $150,000 represented six months’ salary. The balance was for accrued sick time, vacation pay and COBRA payments.

About a third of the pension system’s more than 9,000 active members and retirees have DROP accounts, which average more than $400,000 apiece. About 250 have more than $1 million.

The deferred retirement program allows police officers and firefighters with enough years of service to begin receiving pensions and keep working. Their retirement benefits stop growing, but the pension payments accumulate for them in separate accounts, with interest paid by the system. It builds to a nice lump sum by the time they actually do stop working.

The interest rate this fiscal year is 8.78 percent. It is scheduled to go to 8 percent in October.

One of those with more than $1 million is Mike Holloway, a firefighter who told trustees that the fund could have his principal if it just kept paying him 8 percent on that balance every year.

“All I ever did was work for a paycheck,” Holloway said.

Keith Johnson, a retired police officer, said proposed changes when fully implemented would cost him about $10,000 a year in interest payments.

“You’re not going to take from me without a fight,” he told trustees. He was one of the speakers who threatened legal action.

Interviewed later, Johnson said he had about $325,000 in his DROP account. He also is upset because retirees can’t vote on the proposed changes. Only active members can vote.

After the public comments and their own debate, trustees voted to call a membership referendum that, if approved, would reduce the DROP interest rate to 5 percent in 1-point annual increments by October 2017. It also calls for more drastic rate cuts under certain circumstances.

Trustee and Dallas City Council member Lee Kleinman was the only no vote among the 12 board members. He argued for deeper DROP cuts.

Tomasovic said the system would hold informational meetings about the proposed DROP changes in September, and he hopes to have members vote on the proposal in October.

The system last changed DROP provisions in 2011. Those changes were aimed largely at new hires.

Tomasovic said he wasn’t surprised by the emotional nature of the comments at the meeting.

“Police and firefighters, they don’t hold back,” he said. But he said he expects the proposal to pass.